File-sharing services could be liable for theft, high court rules

In a major victory for the entertainment industry, the Supreme Court this morning ruled that Internet file-sharing could be held liable if their products are used primarily to download copyrighted movies and music from the Internet.

The unanimous decision said there was enough evidence of unlawful intent for the case of Metro-Goldwyn-Mayer vs. Grokster to be sent back to lower court for a trial.

The high court appeared to agree with the entertainment industrys argument that the peer-to-peer file-sharing services were actively inducing users to engage in piracy.

We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties, Justice David H. Souter wrote for the court.

Each company (Grokster and StreamCast) showed itself to be aiming to satisfy a known source of demand for copyright infringement, Justice Souter wrote. Souter said substantial evidence supported the entertainment industrys case.

Previously, lower courts had ruled that Grokster and co-defendant StreamCast were not responsible for how people used their software. That protection stemmed from a 20-year-old decision that Sony Corp. was not liable when users of its Betamax VCR used it to illegally copy movies shown on television. In that case the court ruled that Sony was protected because the VCR had a substantial, non-infringing use of letting people records TV shows for later viewing.

But MGM and 27 other entertainment companies said at least 90 percent of Grokster and StreamCast use was for software piracy that cost the industry billions of dollars in lost revenue.

The current case is seen as pivotal by both the massive entertainment and technology industries, leading to 55 amicus briefs being filed on both sides. Music and movie firms said stopping the file-sharing services was crucial to stem the tide of digital piracy. Computer and consumer electronics companies said holding the file-sharing services liable would set a chilling precedent that could stifle future innovations.

Todays ruling opens the door for the entertainment industry to fight piracy by suing companies whose technology is used for illegal copying of copyrighted works. Observers said that will give Hollywood a much stronger weapon than its controversial tactic of suing individual users who download music and movies.